The Weekend Australia

Timor talks on the horizon By Nigel Wilson, Energy writer February 09, 2002

TALKS are to begin within weeks between Australia, Indonesia and East Timor aimed at settling the Timor Sea boundary.

Official discussions, due to begin in Bali on February 25, will reopen the debate on sharing long-term economic benefits worth billions of dollars between Australia and East Timor from future Timor Sea oil and gas developments.

East Timor Chief Minister Mari Alkatiri confirmed in Darwin this week that talks would be held on the seabed boundary. He was quoted as saying he expected negotiations to be difficult.

Dr Alkatiri's remarks caught the NT Government by surprise as its Energy Minister, Paul Henderson, is preparing for talks in Canberra next week aimed at securing backing for a tough stance on a floating liquefied natural gas development of the Sunrise gas field.

The boundary issue was set aside last year in negotiations to replace the Timor Gap Treaty signed in 1989 between Australia and Indonesia.

The agreement gave East Timor up to 90 per cent of tax revenue from Timor Sea developments and embodied "arrangements for the exploration and exploitation of the joint petroleum development area pending a final delimitation of the seabed between Australia and East Timor".

This terminology gave protection to the four groups that held licences under the Timor Gap treaty but raised questions about future developments.

Woodside is closely monitoring developments in East Timor ­ particularly as to how they might affect unitisation of the Sunrise and Troubadour reservoirs.

Last year US group General Atomics, through subsidiaries Oceanic Exploration and Petrotimor, launched legal action in Australia designed to upset the Timor Sea agreement.

The claim arises from a concession granted by Portugal in 1974 to Petrotimor for the exclusive right to explore and develop petroleum resources under the seabed adjacent to what was then Portuguese Timor.

While the legal action is regarded as unlikely to succeed, there is mounting pressure within East Timor for the new country to take the seabed issue to the World Court.

Under some boundary proposals, Australia would lose sovereignty over the Sunrise reser voir, which contains an estimated 14 trillion cubic feet of gas, and the Laminaria/Corallina oil fields ­ the nation's biggest producer.

Seabed talks weren't expected to begin until after May.

The NT Government yesterday denied it wanted to block Shell's plan for a $4.9 billion FLNG development for Sunrise, which is now regarded as the most economic option.

But the Government is concerned that, unless pressure is brought to bear, most of the economic benefits of FLNG development will go overseas.

It's concerned the Sunrise partners have no agreed strategy to bring gas onshore from the reservoir.

Dr Alkatiri has also confirmed a deal negotiated with Phillips Petroleum would result in gas being piped from the $US1.4 billion Bayu Undan gas recyling project to Darwin for marketing by late 2005. This is a year later than originally planned.

Meanwhile, installation of Bayu Undan offshore gas processing facilities about 500km north-west of Darwin will begin next month.

It is expected that drilling of foundations for the project will begin in April.

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